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Speculative completions and second-hand supply cause supply to rise by 62%
MPC3, Magna P Park Corby, where GLP, advised by Savills, has recently reached practical completion on a 586,353 sq ft speculatively developed unit.
The East Midlands continues to be the target of many industrial and logistics occupiers seeking to acquire space in the UK, with take-up surpassing 2022 levels and the long-term average by 47%. Due to the sustained demand, prime rents have risen by 8% in the last twelve months. Savills expects the vacancy rate to peak at 7.2% in Q1 2024 with speculative completions, before falling to sub 6 % by year end
Ranjit Gill, Director, Birmingham
Supply
There are currently 38 units available over 100,000 sq ft in the East Midlands, totalling 8.67m sq ft – this is a rise of 62% in the last 12 months. This is largely due to 2.6m sq ft of speculative development completions along with 2.21m sq ft of ‘occupier-controlled’ space being added to the market.
Despite the rise, the vacancy rate remains low at 6.68%. Savills analysis highlights that as long as the vacancy rate remains below 12%, there will be further rental growth within a region. Savills new rental growth projections suggest that in our baseline scenario, the region will see 4.8% growth per annum over the next five years.
Currently, 46% of space on the market is Grade A speculatively developed space, 18% is second-hand Grade A space, 35% is Grade B space, and just 1% is Grade C space.
In terms of unit count, there are 21 units available within the 100,000–200,000 sq ft size band, nine within the 200,000–300,000 sq ft size band, five within the 300,000–400,000 sq ft size band, and three over 500,000 sq ft.
Take-up
Take-up in 2023 has reached 9.02m sq ft across 28 transactions, representing a 9% increase on 2022. The average transaction size continues to surpass neighbouring regions, reaching 322,032 sq ft, highlighting the continued occupier preference for larger units.
Analysing transactional activity by specification shows that 54% of space transacted this year has been built-to-suit space, 28% has been speculatively developed space, and just 18% was second-hand space. This has been a notable shift in occupier preference as, according to the long-term average, 39% of space transacted per annum is second-hand space. By grade, 28% of space transacted has been Grade A speculatively developed space, 66% has been Grade A space, 4% has been Grade B space, and 2% has been Grade C space.
Looking at transactions by unit count, there have been 15 within the 100,000-200,000 sq ft size band, three within the 200,000-300,000 sq ft size band, four within the 300,000-400,000 sq ft size band, three within the 400,000-500,000 sq ft size band and three over 500,000 sq ft.
3PLs were most active in 2023, accounting for 31% of all space transacted; online retailers returned at the back end of the year as certainty over inflation returned, accounting for 26%, whilst manufacturers sought to improve their supply chain resilience, accounting for 17%.
Development pipeline
There are currently 13 units under construction, totalling 3.07m sq ft. There are eight units under construction within the 100,000–200,000 sq ft size band, one within the 200,000–300,000 sq ft size band, three within the 300,000–400,000 sq ft size band, and one over 500,000 sq ft.